If you’re considering whether to buy a home versus renting, you’re making a smart financial decision. Homeownership has many financial benefits that you won’t get with renting. It’s important to weigh the pros and cons of both when making your decision.
The most significant financial benefit of buying a home is building equity. Equity is the portion of your home that you actually own and can be thought of as an asset. As your mortgage balance decreases, your equity increases. Over time, if property values in your area increase, so does your equity–that’s free money in the form of an investment! Plus, when it comes time to sell, you will likely make more money than what you paid for the home.
There are also tax deductions available for homeowners that can be a great way to save money each year. Mortgage interest payments and property taxes are both tax deductible, so if you itemize on your taxes, these deductions can add up quickly and reduce the amount you owe in income taxes significantly.
Another benefit is that once you own a home, it’s yours–no more moving every year or dealing with landlords who may raise rent or call to inspect at any time without warning. When buying a home, you can make it exactly what you want without worrying about permission from someone else or paying extra fees for renovations or repairs. Plus, if there’s ever an emergency repair needed in the house (like a leaky roof), it’s up to you to fix it–not someone else who could take weeks or months to get around to doing it.
When looking at the overall numbers, buying is typically cheaper than renting in the long run because rent payments rarely go toward owning anything while mortgage payments do! Depending on how much home you buy and how much down payment you put down (typically 20%), over time the amount saved by owning versus renting could be substantial. For example: if you buy a $250k house with 20% down ($50k) and get a 30-year fixed rate mortgage at 3%, then after 10 years of making payments totaling $14k per year ($1.17k/month) plus $4k per year ($333/month) for taxes and insurance, then your mortgage balance would be reduced from $200k down to around $174k–that’s $26k in savings plus whatever increase in value the house has gained over those 10 years!
Of course there are other costs associated with owning such as maintenance and repairs but these costs are typically minor compared to what’s saved each month over renting plus all of the other benefits discussed above such as building equity through ownership and taking advantage of tax deductions.
In summary, owning a home has many financial benefits not available through renting including building equity through ownership, taking advantage of tax deductions each year, and reducing overall costs over time compared to rental payments which don’t go toward anything meaningful other than lining someone else’s pockets!